CEOs expect business conditions to worsen in 12 months

Business conditions are good for now but should worsen slightly a year from now, according to business executives in the latest Survey of Businesses Inflation Expectations.

The survey stated that the perceptions of present business conditions have improved, whereas the perceptions of future business conditions fell slightly.

The views of 306 chief executive officers, managing directors and financial controllers were compiled between February 13 and March 7, 2017 by the Statistical Institute of Jamaica. The Bank of Jamaica (BOJ) uses these types of surveys to inform and assist in shaping monetary policy. The BOJ publishes the survey four times yearly.

The survey report stated that the present business conditions index rose marginally to 232.2 from 228.9 in the previous survey. The index of future business conditions fell to 178.7 from 186.4 attained in the previous survey.

"The increase in the present conditions index primarily reflected a marginal decrease in the number of respondents who are of the view that conditions are 'worse'. The results for the future conditions index reflected a marginal decline in the respondents who are of the view future conditions will be 'better'," according to the analysis accompanying the survey.

CONFIDENCE TRACKING

The BOJ started tracking confidence in December 2013.

At the same time, businesses expect the Jamaica dollar to depreciate by 1.5 per cent over 12 months ending February 2018, or to reach roughly $131.20 against the United States dollar. Business executives are now expecting reduced currency depreciation than in December 2016 when they expected depreciation over 12 months at 2.7 per cent.

"Relative to the previous survey, respondents adjusted downward their outlook for the pace of currency depreciation over all time horizons," added the report.

Survey respondents expected the 180-day Treasury bill rate at 6.4 per cent within three months. The inflation rate for 2016 was 1.7 per cent. Respondents expect inflation for the next 12 months at 4.1 per cent. The survey report added that businesses expect the largest expense increases to come primarily from utilities followed by wages, fuel and stock replacement.